U.S. Service-Sector Activity Picked Up in January -- Update

A measure of service sector activity across the U.S. picked up in January to a 10-year high, suggesting economic growth is poised to accelerate in 2018.

The Institute for Supply Management on Monday said its index of nonmanufacturing activity -- tracking industries including health care, finance, agriculture and construction -- rose to 59.9 in January from 56 in December, the best reading dating back to 2008.

Economists surveyed by The Wall Street Journal had expected a January reading of 56.5. A number above 50 indicates expansion.

The rise was driven by increases in new orders and employment indexes.

"The ISM indexes have been especially volatile in recent months, but January's release is a reassuring sign that the economy has continued to gather momentum at the beginning of 2018," said Michael Pearce, economist at Capital Economics, in a note to clients. "We expect GDP growth of 2.5% for 2018 as a whole, faster than the 2.3% growth seen in 2017."

The new orders index rose to 62.7 from 54.5 in December. The employment index increased in January to 61.6.

The overall U.S. economy has expanded at a healthy pace in recent months, bolstered by consumer and business spending. Gross domestic product, a broad measure of goods and services produced across the U.S., rose at an annual rate of 2.6% from October through December, the Commerce Department said.

A separate ISM gauge that tracks activity in the much-smaller manufacturing sector maintained momentum in January.